Correlation Between CNOOC and Caihong Display

Can any of the company-specific risk be diversified away by investing in both CNOOC and Caihong Display at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CNOOC and Caihong Display into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CNOOC Limited and Caihong Display Devices, you can compare the effects of market volatilities on CNOOC and Caihong Display and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CNOOC with a short position of Caihong Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNOOC and Caihong Display.

Diversification Opportunities for CNOOC and Caihong Display

0.5

Correlation Coefficient

CNOOC  Caihong Display

Very weak diversification

The 3 months correlation between CNOOC and Caihong is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CNOOC Limited and Caihong Display Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caihong Display Devices and CNOOC is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CNOOC Limited are associated (or correlated) with Caihong Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caihong Display Devices has no effect on the direction of CNOOC i.e., CNOOC and Caihong Display go up and down completely randomly.

Pair Corralation between CNOOC and Caihong Display

Assuming the 90 days trading horizon CNOOC Limited is expected to under-perform the Caihong Display. But the stock apears to be less risky and, when comparing its historical volatility, CNOOC Limited is 1.84 times less risky than Caihong Display. The stock trades about -0.01 of its potential returns per unit of risk. The Caihong Display Devices is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  714.00  in Caihong Display Devices on December 2, 2024 and sell it today you would earn a total of  41.00  from holding Caihong Display Devices or generate 5.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CNOOC Limited  vs.  Caihong Display Devices

CNOOC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNOOC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CNOOC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Caihong Display Devices

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caihong Display Devices are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Caihong Display may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CNOOC and Caihong Display

The main advantage of trading using opposite CNOOC and Caihong Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNOOC position performs unexpectedly, Caihong Display can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Caihong Display will offset losses from the drop in Caihong Display's long position.

The idea behind CNOOC Limited and Caihong Display Devices pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.